On Thursday, BTIG adjusted its price target for Neogenomics (NASDAQ: NEO), reducing it to $21 from the previous $23, while retaining a Buy rating on the stock. The revision came after the company's first-quarter results, which saw Neogenomics outperforming revenue expectations with a 4% beat and maintaining another quarter of positive adjusted EBITDA, along with reiterating its 2024 guidance.
The price target adjustment was attributed to market reactions following the company's quarterly earnings call, where a 9% drop in Neogenomics' shares was observed. The decline was linked to management's discussion about evaluating mergers and acquisitions (M&A), which was initially thought to potentially involve dilutive financing. However, management later clarified that their M&A strategy might focus on smaller scale deals rather than large transactions, aiming for deals that would quickly contribute to the company's adjusted EBITDA.
Neogenomics has outlined its priorities in the minimal residual disease (MRD) space, which include winning its RaDaR lawsuit against Natera (NASDAQ:NTRA), developing a next-generation RaDaR test to avoid intellectual property issues, or pursuing M&A through acquisitions, licensing agreements, or technology transfers. The company's management underscored their intention for any deal to be accretive to adjusted EBITDA as soon as possible.
The biotechnology firm also appears to have overcome regulatory concerns, with the market not fully appreciating the resolution of uncertainties regarding the Food and Drug Administration's (FDA) final rule on laboratory developed tests (LDTs), which turned out to be more lenient than expected. BTIG believes that Neogenomics is well-positioned to drive profitable growth, leading to the reaffirmation of the Buy rating despite the lowered price target.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.